£144 million does not fully fund a council tax freeze, COSLA Resources Spokesperson Councillor Katie Hagmann has explained.
Ms Hagmann said: “Disappointingly the Scottish Budget has not provided our local authorities with a fully funded council tax freeze as expected.
“The Scottish Government has set aside £144m stating this will ‘fully fund’ a council tax freeze – this would only provide the income equivalent to a 5% rise.
£144 million does not fully fund a council tax freeze.
“However, Local Government’s core revenue budget was cut by £63m from the outset, essentially leaving just £81m compensation for a council tax freeze. As a result, Local Government is faced with the reality that the funding offered for a council tax freeze only equates to a 2.8% rise.
“This significantly adds to the pressures faced by councils – a recent LGIU survey found that 83% of Scottish councils were looking at a minimum increase of 5%.”
Delivering the building blocks for Scotland’s future?
More than £5 billion is being invested in building a fair, green and growing economy which creates jobs, supports businesses and helps finance Scotland’s public services and the transition to net zero.
Despite one of the most difficult financial climates since devolution, the Scottish Budget 2024-25 maintains its focus on core priorities and drives forward a government-wide approach to economic transformation.
Measures include allocating £67 million to kickstart a five-year commitment to develop Scotland’s offshore wind supply chain and ensure the country reaps the benefits of the global expansion in wind power. This brings total Scottish public sector support for offshore wind to £87 million next year.
The Budget also boosts annual investment in digital connectivity from £93 million to £140 million in 2024-25, delivering critical infrastructure to enable businesses to innovate and grow while connecting more than 114,000 homes and companies in rural areas to gigabit-capable broadband through the R100 programme.
Since entrepreneurship is at the heart of Scotland’s economic strategy, a further £9 million investment in the Techscalers programme will support the country’s best start-ups with world-class mentoring. The Scottish Government is also prioritising the implementation of Ana Stewart and Mark Logan’s Pathways report, focused on helping more women to start and grow businesses.
The Budget also includes:
putting almost £2.5 billion into public transport to provide viable alternatives to car use, and a further £220 million in active travel to promote walking, wheeling and cycling
providing £358 million to continue accelerating energy efficiency upgrades and installation of clean heating systems
increasing the education and skills budget by £128 million
investing £49 million to promote the re-use of resources and reduce consumption, modernise recycling and decarbonise waste disposal as part of Scotland’s transition to a circular economy
Wellbeing Economy Secretary Neil Gray said: “Our focus is on creating new opportunities for a highly productive, competitive economy, providing thousands of new jobs, embedding innovation and boosting skills.
“We are using all the powers we have to support business and to achieve our ambitious net zero targets. Our strategic investment in offshore wind will stimulate and support private investment in the infrastructure and manufacturing facilities critical to the growth of the sector, and we are delivering a real-terms increase in the education budget to help boost skills and increase productivity. As a priority, we will also consult on options for improving the capacity of local authority planning services.
“Scotland’s finances face a worst-case scenario of underinvestment, which means we must make the difficult choices necessary to focus our limited resources on what will deliver most effectively for people and businesses.
“We’ve seen an Autumn Statement that prioritised a tax cut over investing in public services and infrastructure. The Scottish Government cannot follow this, and has not shied away from taking the tough decisions needed to protect and grow this country’s economy.”
COSLA: Council Tax Freeze is NOT Fully Funded
The Scottish Government has delivered a major blow to communities and has put councils at financial risk with a cash cut to Local Government in its draft Budget (published on 19th December) and no provision for inflation or pay increases, COSLA said.
COSLA Leaders described the draft Budget as not only leaving councils at real and significant financial risk for the coming year, but as it stands, it will mean cuts in every community in Scotland and job losses across Scottish Local Government.
Following a full meeting of Council Leaders yesterday (Thursday) COSLA said that whatever way the Government presents the figures, the reality is that once again the people in our communities have been left at the end of the queue.
That is why we are calling for urgent discussions with Scottish government to ensure a meaningful negotiation on the budget takes place before the final budget is presented to Parliament.
Speaking yesterday afternoon, COSLA’s President Councillor Shona Morrison said: “COSLA’s initial analysis, shows a real terms cut to our revenue and capital spending power which will leave Council services at breaking point, with some having to stop altogether.
“The Budget in its current form could result in service cuts, job losses and an inevitable shift to providing statutory services only. This means potentially losing Libraries, leisure centres and all the things that improve our lives.
“COSLA’s initial analysis of the Budget is that the Council Tax freeze is not fully funded. Leaders from across Scotland agreed today that decisions on Council Tax can only be made by each full Council, and it is for each individual Council to determine their own level of Council Tax.
“With any sort of shortfall in core funding, the £144m revenue offered for the freeze is immediately worth less.”
COSLA Vice President Steven Heddle said: “Despite the Verity House Agreement rhetoric about working together on shared priorities it is the same outcome at Budget time for Local Government in reality.
“The Scottish Government is claiming to protect public services, but are not protecting the essential public services provided by councils– Scotland’s councils are key, they deliver your homecare, schools, road maintenance, street lighting, leisure and waste services and have been locked out again.
“We needed increased funding to cope with inflation, but have been given less instead. The cut to Revenue funding we have been given is a devastating blow and the cut to our Capital funding means that we will be unable to meet our targets in terms of a move towards Net Zero and mitigating climate change targets.”
COSLA’s Resources Spokesperson Councillor Katie Hagmann said: “The Scottish Government has disappointingly failed to recognise that investment in Councils is investment in cities, towns and villages across Scotland. As it stands, this is not a good Budget for our communities or the people who deliver our essential front-line services.
“This is a Budget which will mean job losses – real jobs that support families, and deliver vital services that make a positive difference to people’s lives. Sadly, the budget as it stands, leaves nothing for meaningful pay rises in 24/25 so we would call on the Scottish Government to look again, so that our workforce can get the pay rise they deserve next year.”
COSLA Vice President Councillor Steven Heddle has sent a strong warning to the Scottish Government that any Council Tax Freeze must be fully funded.
COSLA’s message is a response to comments made to the media by Deputy First Minister Shona Robison on Sunday.
Councillor Heddle said: “There were a few things in the comments made by the Deputy First Minister yesterday (Sunday) that I am uncomfortable with on behalf of COSLA, our member councils and the communities that we represent.
“Firstly, the Deputy First Minister cannot decide or unilaterally say that the ‘Council Tax freeze to stay’- it’s up to 32 individual council to decide if they have a council tax freeze or not, not her government.
“Secondly, unless it is funded with additional money for each council that allows them to fund their planned Council Tax increases, then it is not fully funded, and it will be our service users who will suffer as a consequence.
“The funding for the freeze needs to be transparently additional and consolidated into our Budgets for future years.”
“The DFM also mentioned the ‘Changing shape of public sector workforce’. Local Government’s workforce has already changed shape drastically. Between 2006 and 2018, the Local Government workforce reduced by 15% (35,000 FTE) before Scottish Government policies such as Early Learning and Childcare added staff back in from 2019.
“The Scottish Government workforce has nearly doubled since 2006; staffing in non-departmental bodies has also doubled and in Scottish Government agencies, staffing has grown by 15%. These increases have added more than 7,000 FTE staff in just over 15 years.
“The Verity House Agreement was designed to ensure positive working between Scottish Local Government and The Scottish Government, and a focus on better outcomes and person-centred services.
“The VHA has three priorities – to tackle poverty, particularly child poverty; to transform our economy through a just transition to deliver net zero, recognising climate change as one of the biggest threats to communities across Scotland; and deliver sustainable person-centred public services.
Local Government will be unable to contribute to these if underfunded.
“COSLA knows that Scottish Government is under pressure financially around this Budget. However, the Council Tax freeze came out of the blue and has serious financial implications.
“And any suggestions that Local Government’s workforce needs cut further will have serious consequences for communities.”
Humza Yousaf addressed the Scottish National Party Conference for the first time as First Minister, in a speech that contained a few new proposals. We’ll take you through some of the main consequences of what was announced (writes MAIRI SPOWAGE, Director of the Fraser of Allander Institute).
Council tax frozen, but at what cost?
The centrepiece announcement was that 2024-25 council tax rates across Scotland would remain the same as in 2023-24. This was a surprise to many – including COSLA – although the Scottish Government has said it “will fully fund the freeze to ensure councils can maintain their services.”
What does that mean in practice? Councils will already have been in the process of deciding what council tax policy will be for the 2024-25 financial year – many of us will have seen consultations and discussions in our local area about this. As they are constrained to fund current spending out of current sources of revenue – of which council tax is a significant component – decisions on spending going forward may have already been taken on the basis of future income from council tax. The First Minister’s announcement changes that prospective revenue.
Whether or not the promise of “fully funding” the freeze in council tax will depend on what the Scottish Government assesses as the counterfactual for what increases in rates would have been – and how that will be put into practice.
Our calculations indicate that accounting for growth in the number of properties expected in 2024-25, total net revenue from council tax will be £2,865m.
But it we assume councils would have applied the same increases as they did last year (which averaged 5%), revenues would have been £3,013m. And if the proposal for increasing multipliers for the higher bands in the recent council tax consultation had been taken forward revenues would have been higher still, at £3,196m.
In summary then, the freeze in council tax – assuming that councils would have followed the increases from the previous year – will cost £148m. In addition, the decision not to increase the multipliers as has been consulted on will cost £183m.
The true size of the shortfall will depend on what councils were actually budgeting for. If we assumed an 8% increase was being planned – which is lower than some councils implemented last year, and would still not bring much in terms of real increases in funding for local authorities – the total shortfall would be £417m (£229m from the freeze plus £188m from not increasing the multipliers).
How much of the shortfall is covered by the First Minister’s funding pledge will be the subject of a negotiation process with COSLA, and we’ll need to wait to see how it plays out. But ultimately it could lead to councils having less spending power than was expected if the definition of “fully funded” is in dispute.
The Scottish Government was already facing challenges on its budgetary position, given the gap it set out in the Medium Term Financial Strategy in May, of an estimated £1 billion gap between its commitments and likely resources.
Despite a better outturn on income tax than expected, and an increase in borrowing powers, prior to the Programme for Government this was still likely to be around £600m. It is not clear where the extra funding will come from to pay for the council tax freeze – and indeed the announcement on health below.
An “additional” £100m a year to cut NHS waiting lists – but within the fixed envelope
The First Minister also outlined a proposal to spend an extra £100m a year on reducing the NHS waiting lists. The goal is to reduce waiting list by 100,000 by 2026.
As with so many of these proposals, the devil is in the detail, and in this case, the additionality of the pledge is questionable. While the First Minister has announced that more money will be spent on this particular issue, there was no detail where the money was coming from.
With the Scottish spending envelope through the Block Grant largely fixed, spending commitments well ahead of funding sources (as discussed above) for 2024-25, and limited options in terms of yield from tax rises, this announcement seems like it will lead to a reallocation of funding, either from other areas of the health service or from other areas of government spending rather than actual additional spending.
Scottish bonds for capital investments announced – how and why?
The FM announced plans to issue the first-ever government bonds for Scotland to finance infrastructure.
In theory, the power to issue government bonds was devolved as part of the Scotland Act 2012, with the power given full effect in April 2015.
So what would be the process for this? One of the key steps is likely to be establishing a credit rating from major rating agencies. This would provide potential investors with a professional evaluation of Scotland’s creditworthiness.
This process is likely to be fairly involved, consisting of a detailed assessment of Scotland’s economic, fiscal and political environment.
Two questions we’ve been asked already are (i) what will this rating (and therefore the likely interest rate that would have to be paid) be compared to UK government bonds and (ii) to what extent does this tell us about the likely cost of borrowing for an independent Scotland?
The answer to the first question is that there is likely to be a premium to be paid by Scotland compared to UK Government bonds (i.e. it will be more expensive), as a new entrant to the bond market. However, given that ultimately the borrowing is underwritten by the UK Government, it may be that the premium is fairly small. But it will of course depend on the rating and then investors’ reaction to that.
The answer to the second is much more unknown. Given this is underwritten by the UK Government, it is likely that this tells us little about the interest rate that may need to be paid by an independent Scotland.
It is worth underlining that this plan does not increase the borrowing available to the Scottish Government. The annual limit (of £450m in 2023-24 prices) and total cap (of £3bn in 2023-24 prices) will still apply. Rather, it is an alternative to borrowing from the National Loans Fund (essentially from the UKG).
It’s unlikely that the terms of borrowing through issuing bonds will be more favourable than borrowing from the National Loans Fund, which tends to be very close to Bank Rate plus a minimal spread.
Another point to note is that the Scottish Government in recent years has used its capital borrowing powers extensively. In the current year, its debt stock sits at 73% of the debt cap already – forecast to rise to around 80% by the end of the parliament. Therefore the borrowing that will be possible may be more limited by the end of the parliament, particularly as borrowing costs are rising.
The FM set out why they may wish to do this in his speech – focussing on the enhanced profile it could give Scotland internationally, and the additional investment it could attract from international investors. It may be that the process of establishing and issuing the bonds is seen as strengthening the Scottish state in advance of a future independent Scotland.
But in a constrained fiscal environment, it will be fair to ask whether borrowing in a more expensive way makes sense.
Council budget ‘stays true to core priorities for Edinburgh’
Budget agreed for 2021/22 despite ongoing pressures of Covid response (around £85 million to date)
Budget shaped by – and addresses – key priorities of poverty, sustainability and wellbeing
Council Tax to be frozen in 2021/22
One-year rent freeze for Council house tenants following a joint motion by Conservative, Green and Liberal Democrat groups
Further revisions to the budget may be made depending on Scottish Government and UK Government budget decisions in March
Councillors in Edinburgh have agreed a new business plan and budget framework to drive the Capital’s recovery from the pandemic in the coming years while tackling key priorities of eradicating poverty, cutting carbon emissions and working for a fairer, more inclusive city where every resident feels valued and empowered.
Despite the ongoing financial pressures brought about by the impact of Covid19 on Council services and communities across the city, a balanced £1 billion-plus budget has also been set for the next financial year (2021/22), with Council Tax frozen at 2020/21 levels to help protect household budgets.
In addition, rents for Council house tenants have been frozen for a year (2021/22) following a joint motion by the Conservative, Green and Liberal Democrat groups.
Financial flexibilities already agreed with the Scottish Government have contributed to the balanced budget position for 2021/22, with an acknowledgement that more fundamental service reform, improvement and prioritisation will be required in future years.
At yesterday’s annual Budget Meeting, elected members also approved a three-year Business Plan setting out how the Council would respond to the need for change, titled Our Future Council, Our Future City.
The Business Plan brings together the Council’s core priorities and seeks to shape a sustainable, fair and thriving future for Edinburgh post-pandemic.
The Business Plan and the priorities it sets shapes the four-year budget framework (2022/23 – 2025/26) also approved yesterday, which sets out the need for broader reforms to reprioritise and potentially redesign services to achieve more than £100 million of savings over the coming years.
Finance and Resources Convener Councillor Rob Munn said:When we set a three-year balanced budget in February 2020, we had no inkling of the economic and social turmoil the pandemic was about to unleash across the globe.
“As a city and as individuals, this past year has tested us like no other time in recent memory – and the challenges are ongoing. It’s testament to the dedication, commitment and resilience of all our staff, our services and our city that we’ve been able to agree a new business plan and balanced budget for 2021/22 today.
“Helping Edinburgh and our citizens to recover and rebuild after the strains of Covid19 is critical and, as they’ve done throughout, staff in Council services continue to work tirelessly to look after the city and our communities.
“Guided by our business plan priorities of ending poverty, becoming a net zero city and making sure wellbeing and equalities are enhanced for all we’ve agreed a comprehensive package of additional investments as part of our £1 billion-plus 2021/22 budget, channelling extra funding to where it’s most needed and will have the most meaningful impact.
“We want to pay tribute to the outstanding efforts of our residents in helping Edinburgh weather the Covid storm. We have seen communities come together through the hardest of times and they have shown all of what is best about our city. Without the solidarity and resilience of the people of Edinburgh, the financial, social and life cost to our Capital would have been far higher.”
Vice Finance and Resources Convener Councillor Joan Griffiths said: “Everyone’s lives have been up-ended by the Coronavirus pandemic. Jobs have been cut, businesses hit, children’s education disrupted, families separated and, tragically, many, many lives have been lost.
“It’s essential then that we do whatever we can to help our most vulnerable citizens and those who’ve been hardest hit financially, while at the same time making progress with our key ambitions towards a fairer, greener and better-connected Edinburgh.
“Make no mistake, tough times lie ahead and we’re going to have to think creatively and courageously in the years ahead to meet the substantial savings required.
“As we’ve learned during this crisis, however, difficult times can sometimes be a catalyst for lasting, positive change and we’re determined to drive forward our commitments on poverty, cutting carbon emissions and equal opportunities for everyone to access jobs, training and good places to live.
“Our three-year Business Plan responds to this need for change so that our strategies and approach achieve their ambition of making Edinburgh the best possible place to call home.”
The outcome of the Scottish Government’s Local Government Financial Settlement this year has contributed an extra £9 million* to the Council’s budget.
Investment proposals put forward by the SNP/Labour Coalition for the additional £9 million were agreed as follows:
£0.170m to freeze fees and charges of school meals, care at home services, garden aid and library reservation charges and fines;
£0.400m in 2021/22 to expand support and advice to help people at risk of homelessness and support those experiencing homelessness into secure tenancies;
£1.050m to manage crisis needs, increase funding for direct payments in light of COVID, support food security in the City, embed advice across schools and GP surgeries and expand programmes like Discover!, all to help put millions of pounds extra in the pockets of families who need it the most;
£0.500m to support our climate obligations and further decarbonisation of the Council’s estate;
£0.300m to support delivery measures for the sustainability plan which will be published in the summer;
£0.500 million to enhance our parks, playparks, food growing and urban forests, with £4m of related capital investment
£0.250m into setting up a short-term let licensing and enforcement system to move quickly in dealing with the problem;
£2.000m extra to accelerate the 1-to-1 digital strategy to help all our school pupils get the equipment they need for their studies;
£0.110m to strengthen and support our role as corporate parents by expanding the support team;
£0.175m to support expansion of Edinburgh Guarantee in light of the impact COVID has had on jobs;
£0.500m investment to take forward Smart City initiatives; and
£0.052m to extend the role of the Gaelic Development Officer for one year beyond the end of Scottish Government funding.
Further to this, £2.743m has been allocated to the Council’s unallocated reserves as a contingency against future risks.
While the city council expresses satisfaction at setting a balanced budget, there’s no getting away from the fact that Edinburgh is facing another year of swingeing cuts to service provision.
Earlier this week local government umbrella body COSLA spoke out once again about the consequnces of further cuts.
COSLA warned that communities across Scotland will face unavoidable and damaging consequences if Local Government does not receive a fair funding settlement in this year’s Budget
COSLA said that the trend of recent settlements for Local Government needs to change because on top of existing pressures, the COVID pandemic has placed unprecedented strain on the finances of Scotland’s Councils this year.
the costs of COVID-19 to Local Government and the need for these to be met,
flexibility on how the budget allocated to Councils is spent and
an increased budget allocation to address the reduction in funding to Councils over recent settlements.
Speaking as she launched the document on Tuesday, COSLA Resources Spokesperson, Councillor Gail Macgregor, said: “This year, across every community in Scotland, Local Government’s essential role has been magnified and once again we have delivered for our communities.
“Nobody in Scotland has been unaffected by this pandemic and the financial impacts of COVID-19 are severe. Individuals, families and businesses have all felt the effects and continue to look to Councils for support every day.
“Sustaining this lifeline support is placing extreme pressure on already strained budgets and without fair funding for Local Government this year, the consequences for the most vulnerable in our communities would be unacceptable.
“That is why we need fair funding for 2021/22 that respects our communities. Without this, there will be further cuts to services, reductions in spending locally, increases in the inequalities exposed by the pandemic and a much slower recovery.”
Echoing these concerns, COSLA President, Councillor Alison Evison, said: “Local Government’s role on behalf of our communities cannot be underestimated anymore. The COVID pandemic has shown exactly how much the public rely on us as leaders and as providers of vital services.
“The reality is that in recent budgets, the Scottish Government has chosen not to provide enough funding for the essential services that communities rely on day in day out.
“On top of this, this year we have had to contend with COVID-19 which has seen the inequality in our society grow.
“Our ability to recover from this and continue to deliver for Scotland’s communities depends on a change of emphasis from Scottish Government that provides fair funding for Council services.
“If we are to truly recover from this pandemic then Local Authorities must receive a fair settlement.”
